Editor's Note
Editorial Staff Executive Editor and Director of Programs Kim Phelan kphelan@aednet.org Art Director heather jarmusz hjarmusz@aednet.org Marketing/Advertising Coordinator jaclyn Bovio jbovio@aednet.org Contributing Editors joanne costin Costin Custom Creations Garry BartecKi BDO Seidman and AED Vice President of Finance christian Klein AED Vice President of Government Affairs and Washington Counsel eli lustGarten ESL Consultants Bill & chris sitter Jordan-Sitter Associates ron slee R.J. Slee & Associates Sales Representatives Vice PresidentSales/ Publisher DaviD W. GorDon 800-388-0650 ext. 334 dgordon@aednet.org Advertising Sales Manager alBert j. ramirez 800-388-0650 ext. 311 aramirez@aednet.org 615 W. 22nd St. Oak Brook, IL 60523 630-574-0650 fax 630-574-0132 www.aednet.org October 2009 Construction Equipment Distribution www.cedmag.com 7 By Kim Phelan A few highlights from one market analyst's meetings with executives from Deere, CNH, Caterpillar and Komatsu Watch Used Equipment as a Recovery Indicator While i was busy taking in the wealth of knowledge being dispersed throughout the loaded Executive Forum program on Thursday, Sept. 10, my friend Mark Koznarek was busy gathering his own collection of deep industry insight. Mark is a founding partner of Cleveland Re-search Co., who specializes in heavy machin-ery market analysis on this particular day, he and his colleague Joe Calvello, embarked on their annual Big Iron Day, a full agenda of face-to-face meetings with four of the world's top construction equipment manufacturers. I thought it would have been great to be a fly on the wall to hear these dialogs, but as flies aren't well equipped for notetaking, Mark thankfully provided me with a much better alternative: He generously offered to share the highlights of those visits and he gave me permission to share them with you. I've selected just a handful of key excerpts I found especially noteworthy. Deere Meeting Executives told Mark that on the credit scene, the worst is behind us. For Con-struction & Forestry, inventory level is two to three months; half that of their competi-tors. Stimulus demand for equipment will be small in 2010 as the erosion in state budgets offsets much of the federal stimulus spend-ing. Overall, government spending is forecast up 3 percent, below prior expectations. DE is forecasting a sizable pickup in housing starts to 870k units in 2010, but sees nonres. con-struction down (14 percent). In NA, the CE demand is down about 70 percent from the `06 peak, far below normal cycle troughs. CNH Global Meeting For construction equipment, one executive said, I think we are close to the bottom. The company's CE Strategic Evaluation is still devel-oping. The goal is to simplify the overlapping excavator joint ventures (JVs) with both Sumi-tomo and Kobelco...CNH desires 100 percent control rather than JV arrangements. Parting thoughts: We are seeing some recovery in the capital markets. The used equipment market will be an important indication [of recovery] and should be watched carefully. CE produc-tion is down (70 percent) 2H from '08 levels. Caterpillar Meeting A tour of the Aurora, Ill., wheel loader and ex-cavator plant revealed about 50 percent imple-mentation of the CAT Production System there automation was much more evident than in past visits, which is expected to impact both quality and costs. Other key points: Dealer inventory reduction of $3 billion is underway to get to three months level. This drawdown is a major part of the production cut about 20 percentage points of the 70 percent manu-facturing reduction. Market comment: U.S. market is the big disappointment, down 75 percent from prior peak in 2006-07. Komatsu Meeting (N. America Construction) Watch used equipment pricing as an indicator for future demand recovery. Ma-chine monthly unit sales have been down roughly 50 percent yr/yr since April; but the August decline may have moderated a bit. Parts sales have picked up over the last two to three months in N. America. Thoughts on cycle recovery: Housing may not be a driver for new equipment sales until housing starts exceed 1.0mm units. The 2010 highway bill reauthorization could have a positive impact if the budget is expanded from recent trend. Regarding NA Stimulus executives initially thought the $787 billion program would create demand for 4k-5k new machines; they now have revised that to 2k units. Thanks for reading. If you'd like to talk to Mark, he can be reached at 216-649-7206, or mkoznarek@cleveland-research.com. Editor's Note Kim Phelan () is the kphelan@aednet.org executive editor of Construction Equipment Distribution and director of programs for AED.